Tex. Windstorm Ins. Ass'n v. Dickinson Indep. Sch. Dist.

• Decision Date: 04 October 2018
• Docket Number: NO. 14-16-00474-CV,14-16-00474-CV
• Citation: 561 S.W.3d 263
• Parties: TEXAS WINDSTORM INSURANCE ASSOCIATION, Appellant v. DICKINSON INDEPENDENT SCHOOL DISTRICT, Appellee
• Court: Texas Court of Appeals

561 S.W.3d 263

TEXAS WINDSTORM INSURANCE ASSOCIATION, Appellant

v.DICKINSON INDEPENDENT SCHOOL DISTRICT, Appellee

NO. 14-16-00474-CV

Court of Appeals of Texas, Houston (14th Dist.).

Substitute Majority and Dissenting Opinions filed October 4, 2018

SUBSTITUTE OPINION

Kevin Jewell, Justice

The parties' motions for rehearing are denied.¹ We withdraw our May 31, 2018 majority opinion and substitute the following in its stead. Our judgment remains unchanged.

Today we consider whether Dickinson Independent School District ("DISD") is entitled to judgment for breach of contract damages against Texas Windstorm Insurance Association ("TWIA") based on an appraisal award.

DISD sued TWIA in connection with TWIA's handling of DISD's Hurricane Ike claims. DISD alleged breach of contract and related claims. During the proceedings, TWIA invoked the insurance policy's appraisal provisions, and the resulting appraisal award totaled $10.8 million in damages. DISD amended its petition to abandon all claims except breach of contract and, based on the appraisal award, filed traditional motions for partial summary judgment on the elements of causation and damages. TWIA opposed the motions because, among other things, DISD had not conclusively proven that the alleged damages reflected in the appraisal award, or any portion of them, were caused by covered perils. The trial court granted both motions in DISD's favor. The case proceeded to trial and the sole question put to the jury was whether TWIA breached the policy by failing to pay the appraisal award, which the jury answered affirmatively. The trial court signed a final judgment against TWIA for $9,602,542.82.

TWIA challenges the trial court's judgment in the following issues:

• In its first issue, TWIA challenges the orders granting partial summary judgment on causation and damages because DISD did not conclusively prove (or TWIA raised genuine issues of material fact) that DISD's alleged damages were caused by a named peril or covered by the TWIA policy. Further, TWIA asserts that DISD did not meet its burden to prove coverage at trial through expert testimony. As a remedy, TWIA requests rendition of judgment as a matter of law or remand for new trial.

• In its second issue, TWIA contends that the trial court reversibly erred in excluding TWIA's trial evidence supporting its affirmative defenses.

• In issue three, TWIA urges that the trial court erred in submitting DISD's jury question and in refusing to submit TWIA's proposed question and instructions.

• Finally, in its fourth issue, TWIA contends that legally insufficient evidence supports the jury's finding that TWIA breached the policy by not paying the appraisal award or that TWIA's failure to pay the award proximately caused the damages reflected in the judgment.

For the reasons explained below, we sustain TWIA's first issue in part and hold that the trial court erred in granting DISD's motions for partial summary judgment on causation and damages because DISD's evidence, including the appraisal award, did not conclusively prove whether and how much alleged loss was caused by a covered peril and otherwise subject to coverage under the policy terms and conditions. Having sustained this portion of TWIA's first issue, we further conclude that remand for further proceedings, as opposed to rendition of judgment, is the appropriate remedy under the present circumstances. Given our resolution of TWIA's first issue, reaching TWIA's remaining issues is not necessary to final disposition of this appeal. See Tex. R. App. P. 47.1. Accordingly, we reverse the trial court's judgment and remand for further proceedings consistent with this opinion.

Background

TWIA issued a windstorm and hail commercial policy of insurance to DISD, the named insured. The relevant policy period was from September 1, 2008 to September 1, 2009. As to each covered property, the policy provided for two potential forms of coverage depending on whether a limit of liability for a particular form of coverage was shown in the declarations. The two forms of coverage were identified in the policy as "COVERAGE A (Building)" or "COVERAGE B (Business Personal Property)." The policy provided in relevant part² as follows:

AGREEMENT

We will provide the insurance described in this policy in return for the premium and compliance with all applicable provisions of this policy.

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COVERED CAUSES OF LOSS

We insure for direct physical loss to the covered property caused by windstorm or hail unless the loss is excluded in the Exclusions.

EXCLUSIONS

The following exclusions apply to loss to covered property:

1. Flood.

We will not pay under any and all circumstances for loss or damage caused by or resulting from flood, surface water, waves, storm surge, tides, tidal water, tidal waves, tsunami, seiche, overflow of streams or other bodies of water, or spray from any of these, all whether driven by wind or not.

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6. Rain.

We will not pay for loss or damage caused by or resulting from rain, whether driven by wind or not unless wind or hail first makes an opening in the walls or roof of the described building. Then we will only pay for loss in the interior of the building, or the insured property within, caused immediately by rain entering through such openings.

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CONDITIONS

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4. Duties After Loss.

a. Your Duties After Loss. In case of a loss to covered property caused by windstorm or hail you must:

(1) Give us prompt written notice. Include a description of the property involved;

(2) Protect the property from further damage;

(3) Make reasonable, necessary, and temporary repairs to protect the property;

(4) Keep an accurate record of repair expenses;

(5) Furnish a complete inventory of damaged personal property showing the quantity, description, and amount of loss. Attach all bills, receipts and related documents which you have that justify the figures in the inventory....

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10. Appraisal. If you and we fail to agree on the actual cash value, amount of loss, or cost of repair or replacement, either can make a written demand for appraisal. Each will then select a competent and independent appraiser and notify the other of the appraiser's identity within 20 days of receipt of the written demand. The two appraisers will choose a competent and independent umpire. If they cannot agree upon an umpire within 15 days, you or we may request that the choice be made by a judge of a district court of a judicial district where the loss occurred. The two appraisers will then determine the amount of loss, stating separately the actual cash value and loss to each item.

If the appraisers fail to agree, they will submit their differences to the umpire. An itemized decision agreed to by any two of these three and filed with us will determine the amount of the loss.

Each party will pay its own appraiser and bear the other expenses of the appraisal and umpire equally.

Hurricane Ike struck Galveston County, Texas on September 13, 2008, during the effective dates of the TWIA policy. Three days later, DISD notified TWIA of windstorm damage to several of its buildings. TWIA acknowledged DISD's claim and hired an adjuster to manage the claim. TWIA's adjuster and DISD personnel inspected DISD's campuses and documented the damage found. TWIA's adjuster verified damages exceeding policy deductibles on numerous insured structures and sent the documentation to DISD personnel for review. In December 2009, TWIA paid DISD $220,232.85 for these damages. DISD subsequently signed a proof of loss, reflecting the cash value of the claim, as well as depreciation that TWIA would pay upon completion of repairs. TWIA paid DISD recoverable depreciation of $8,667.80 in March 2010.

In September 2011, DISD contacted TWIA concerning a roof on one of DISD's buildings. DISD had replaced the roof and sought reimbursement of $1,550,645.75 as additional damages caused by Hurricane Ike. TWIA paid $999,577.19 for this supplemental claim in October 2011 (DISD's "Roof Claim"), though apparently no documentation was provided establishing a wind-created opening on the roof. This amount did not include general contractor overhead and profit amounts. In March 2012, DISD provided a new sworn proof of loss.

The following September, DISD filed the instant lawsuit against TWIA. DISD claimed that TWIA breached its contract, violated the Texas Insurance Code, breached its duties of good faith and fair dealing, and committed fraud. Prior to filing suit, DISD did not notify TWIA of any additional losses it contended were covered under the policy. TWIA asserted a general denial and several affirmative defenses.

DISD demanded that TWIA pay $311,623.04 for overhead and profit related to DISD's Roof Claim, $292,942.12 in statutory interest, and $225,000 for attorney's and expert fees, for a total of $829,566.16.³ In response, TWIA invoked the policy's appraisal clause.

DISD designated Mark Domangue as its appraiser, and TWIA selected Jonathan Held. The trial court appointed former judge Donnie Ray Burgess as umpire over TWIA's objection. Initial appraisal inspections occurred between October 1 and October 9, 2013. By that time, DISD already had repaired, replaced, or sold some of the damaged property for which it claimed further compensation was due under the policy. Domangue provided Held his initial damages estimates in early June 2014. Held reciprocated two months later and also sent Domangue a comparison detailing the differences in their initial estimates.

Held and Domangue met to review estimates. They agreed to some items and changes, but were unable to agree on an overall damages estimate. They were to exchange revised estimates for final review before meeting with Burgess. Domangue did not provide Held with his revised appraisal, but instead informed Held that the revisions were not "significant" and would not change his overall summary.

Burgess inspected DISD's buildings in March 2015. Neither Held nor Domangue were present when Burgess inspected the buildings. Burgess, Held, and...